Clause 19 - Arbitration fees and expenses

Commercial Rent (Coronavirus) Bill – in a Public Bill Committee am 9:25 am ar 14 Rhagfyr 2021.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy) 9:25, 14 Rhagfyr 2021

I beg to move amendment 4, in clause 19, page 12, line 6, leave out “may” and insert “must”.

This amendment would require the Secretary of State to make regulations specifying limits on arbitration fees.

Photo of Stewart Hosie Stewart Hosie Shadow SNP Spokesperson (Cabinet Office), Shadow SNP Spokesperson (Constitution)

With this it will be convenient to discuss amendment 5, in clause 19, page 12, line 8, after “question” insert

“and having regard to the accessibility and affordability of the arbitration process.”

This amendment would require the Secretary of State to consider the accessibility and affordability of the arbitration process when specifying limits on arbitration fees.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

I am pleased to move amendment 4, which relates to limits on arbitration fees, and speak to amendment 5, which relates to the accessibility and affordability of the process. We recognise that parties have to meet their legal and other costs, but we believe that arbitration fees and expenses should be proportionate to the arrears that are the subject of the dispute, and that they should not create a significant cost for the parties. I am sure the Minister recognises the harmful effect that a high arbitration cost would have on businesses that are already struggling, and it is only those in very difficult circumstances that are going into the process in the first place.

Clause 19 gives the Secretary of State the discretion to specify ceilings for arbitration fees in secondary legislation. We believe the Secretary of State should make such regulations to provide a cap, which would be the effect of amendment 4. We have also tabled amendment 5, which

“would require the Secretary of State to consider the accessibility and affordability of the arbitration process when specifying limits on arbitration fees.”

That is to ensure that, when setting new limits, the Secretary of State explicitly takes into account how the limits will affect the ability of business tenants and landlords to enter the arbitration process. I hope the Minister recognises the importance of ensuring that arbitration is not too costly for either landlords or tenants, particularly as businesses are again seeing falls in revenues at this stage. There is a cross-party desire to tackle rent debt, but we want the arbitration process to work. For that, businesses must be able to afford to enter the process.

I would be grateful if the Minister could respond to a concern raised by a stakeholder about the fees and costs that the arbitration bodies may apply. I understand that there is a £750 fee associated with a complaint under the rules of certain arbitration bodies. Would such a cost be included within the cap? I thank the Minister in advance for his response.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

As the clause stands, the Secretary of State will have the delegated power to make regulations specifying limits on the fees and expenses of arbitrators, but if the power is exercised, approved arbitration bodies will still have the discretion to set fee levels up to the cap limit. We have adopted a market-based approach that enables arbitration bodies to set fee levels for themselves, because they are best placed to decide, given their experience of costing arbitration schemes to make them affordable for parties and attractive enough for arbitrators to take on cases. The Secretary of State’s powers are intended to be used only when circumstances determine that it is appropriate.

We have designed the arbitration scheme to be affordable, and we are working with arbitrators to agree the cost schedules, which may answer the hon. Member’s question. Setting fee levels at this stage would be counterproductive, because we do not know what the market rate is while discussions are ongoing. A market-based approach is the optimum way to ensure that, on one hand, there is enough capacity in the system to deal with the case load and that, on the other hand, fees are affordable. Hon. Members have also asked that an express requirement be inserted that would require the Secretary of State to have regard to the accessibility and affordability of the arbitration process when specifying those limits. As I said, affordability is an important consideration in our discussions. It will be an important factor that will determine accessibility. We will take it into account when deciding if and how to exercise this power.

We have tested the cost of similar arbitration schemes currently on offer in the market, and landlords and tenants have indicated that it is affordable. We do not want to specify cost limits unless there is a need to do so. For those reasons, I do not accept the amendment 4. Amendment 5 is unnecessary. I hope the hon. Member will not press the amendments.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy) 9:45, 14 Rhagfyr 2021

I thank the Minister for his remarks, but I do not think that they approach the heart of the debate. I would like to push amendment 4 to a vote, because this is an important issue.

Question put, That the amendment be made.

Rhif adran 1 Commercial Rent (Coronavirus) Bill — Clause 19 - Arbitration fees and expenses

Ie: 7 MPs

Na: 10 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

The Committee divided: Ayes 7, Noes 10.

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

Clause 19 concerns the fees and expenses of the arbitrators of approved arbitration bodies. We want to make sure that we have capacity and that it is affordable. If the cost does indeed prove to be a barrier, we can cap the fees to ensure that it remains affordable.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

Notwithstanding the concerns we have just raised, which we will continue to pursue, we support clause 19.

Question put and agreed to.

Clause 19 accordingly ordered to stand part of the Bill.